Key Points
EU, UK and US are expecting to post their Services and Manufacturing PMIs this week.
Energy price drop main factor in UK inflation decrease.
US economic data supporting the ‘Higher for longer’ interest rate view
World News
GBP
The pound was the only G10 currency to notch a weekly gain against the USD last week, with cable’s 0.3% uptick proving enough to send the quid to the top of the FX leaderboard, even if the pair remains trapped within a tight range in the mid-1.27s
Cable’s gains came amid signs of relief on the UK inflation front, with headline CPI falling to 6.8% YoY in July, albeit with the fall being driven largely by energy prices, and despite a rather dismal labour market report, which showed unemployment rising to 4.2%, with June seeing the biggest fall in employment since records began in 1992
Looking ahead, Wednesday’s ‘flash’ PMI surveys provide this week’s calendar highlight, with the data likely to show a further slowing in economic momentum in both the services and manufacturing sectors, though the impact of this data on the September BoE decision is likely to be limited
EUR
The common currency had another torrid time last week, notching its fourth weekly loss in five, and trading back beneath the $1.09 handle, though the move was once more largely a function of significant USD demand, as opposed to any EUR-specific catalysts
Said catalysts remain rather thin on the ground, as the ECB continues its traditional summer break, and as the data docket remains quiet, with last week bringing nothing by way of macro fireworks from the bloc
This week, things may become a little more interesting, with the aforementioned ‘flash’ PMI figures also due from the eurozone, though we shall have to wait until Friday night (UK time) for the week’s main event, with ECB President Lagarde set to speak at the Jackson Hole Symposium, and markets on alert for any hints as to the September policy decision
USD
The greenback remains the ‘pick of the bunch’ in G10 FX, having gained against all majors besides the GBP last week, as the market continues to buy into the idea of ‘US exceptionalism’ and, by extension, the FOMC keeping rates ‘higher for longer’
-Incoming economic data continues to support that view, with last week seeing all of retail sales, industrial production, and jobless claims beat expectations by some margin, with ongoing selling in the Treasury market resulting, and also helping to keep the buck well-bid
In the week ahead, it will again be on Friday when this week’s main event occurs, with Fed Chair Powell due to speak at Jackson Hole, with risks tilting towards the hawkish side for the Chair’s remarks, even if a hike in November, rather than September, seems more likely at this juncture
World News
The labour market has shown for the first time that it is losing some of its inflationary pressure. Data has suggested that vacancies and advertised starting salaries both fell in July, giving evidence that the Bank’s action against inflation is working following fears that spiralling wage increases would further drive inflation up over the coming months. The most recent interest rate hike sae rates his 5.25%.
China’s central bank has cut one of its key interest rates again as the world’s second largest economy continues to return back to pre-pandemic levels. The country’s covid recovery has been hit by a property crisis, failing exports and weak consumer spending. In contrary, other major economies have raised rates to combat high inflationary pressure. China are looking to boost confidence and in turn boost consumption and growth.
Data Releases
| Date | Region | Release | Previous | Consensus |
| Wednesday 23rd August | EU | Manufacturing and Services PMIs | ||
| Wednesday 23rd August | UK | Manufacturing and Services PMIs | ||
| Wednesday 23rd August | US | Manufacturing and Services PMIs | ||
| Wednesday 23rd August | CA | Retail Sales m/m | 0.20% | 0.00% |
| Friday 25th August | US | Revised UoM Consumer Sentiment | 71.2 | 71.2 |
Indices
| Share Index | Prev. Close | Open |
| FTSE100 | 7,262.43 | 7,262.43 |
| DAX | 15,574.26 | 15,573.95 |
| CAC40 | 7,164.11 | 7,165.07 |